M&A: Messy and Awkward

Virginie O’Shea, founder, Firebrand Research

It’s interesting to note the amount of industry commentary that goes on around mergers and acquisitions, and how often people seem to be surprised when the firms in question struggle with the integration part of M&A. The recent merger between the London Stock Exchange Group and Refinitiv is a case in point. I ask myself, were people asleep when Thomson Financial and Reuters merged? Refinitiv has been here before and anyone left from those days already has the T-shirt. Mergers are never easy and they are rarely simple.

But why are they so challenging (I imagine you asking)? Well, for a start you have the combination of three main things: people, operational structures/processes and technology/services.


It can take quite a while for the ideal target operating model to be crafted. First, the management has to properly get to grips with the assets, the processes and the structures of the two organisations; and that’s much more easily and fully achieved from inside rather than outside (post rather than pre-deal). Once the management team knows what it has got to work with, painful and difficult decisions usually need to get made about the business lines to exit and those to double-down on. Reporting lines need to be drawn up and best practices need to be agreed and established.

None of this stuff is easy. While some decisions will be clear-cut—for example, choosing to shut down an unprofitable and operationally complex regulatory reporting service, perhaps. Others will be murky grey areas that require a careful approach with an eye to how this move impacts competitive positioning in the long-term, how clients might react and, potentially, how regulators might respond. Developing a resilient organisation in the long-term requires a lot of planning and assessment.

There’s a lot to think about and it can be very distracting to managing and maintaining business as usual. With internal resources tied up in thinking about the future path of the firm, opportunities open up for competitors to swoop in and take advantage. The potential for change can also make some clients nervous—will the new entity hike its prices up? Will the firm sunset the legacy solution stack or will it remain on the same path as before for its flagship solution? Clear communication externally is key to keeping these concerns to a minimum.

These decisions also play into the other big area of change…


The cultural bit of a merger can often be the trickiest bit, especially if you have two entities with management teams from countries with significantly different social norms. Even for those with the same cultural references, different company cultures rarely blend without some degree of friction. New reporting lines may increase that friction.

Much like clients, staff may feel unsettled about the future of what was once a known entity to them. Management changes may mean huge strategic shifts that alter everything from working conditions to company culture. Just imagine moving from a 9 to 5 work culture, for example, to a more task-oriented approach where long hours may be deemed necessary. Or dealing with a change in the fundamental values of the company. Moreover, job changes could be even more significant if redundancies and restructuring is in the cards.

M&A deals are littered with examples of companies that just couldn’t get the deal to gel. This tends to mean spin-offs of certain business units or the unfortunate shutting down of the acquired business segments. Again, clear internal communication is an important component of retaining key staff and making sure that communication is two-way means any problems are dealt with before they blow up.


The current state of capital markets technology aptly demonstrates how difficult the technology component of mergers is to manage. Sometimes it can just be easier to maintain the silos rather than trying to move one line of business onto a different technology stack. Look at the silos in major banks and you can see the lines drawn by previous M&A. Why else would the average bank have 9.1 technology solutions for post-trade processing (as per Firebrand’s latest research)? Technology replacements are painful and the business case needs to be rock solid and have the business’ support and buy-in top-down and bottom-up.

Next time you look at a merger, think about all the things that have to go on behind the scenes to get these things right. It’s messy work, but someone has to do it.